The cost of an inventory management system

We all know that effective inventory management is critical to running a successful business. As our business grows and the number of products and orders increases, it becomes challenging to manage them using spreadsheets. This is when many businesses turn to find a digital inventory management solution.

When you start to choose an inventory management software, the first question that comes to mind is, "How much will it cost?" In this article, we will delve into the cost of a typical inventory management software, providing an overview of pricing, factors influencing costs, and what your business needs to get started.

The average cost of an inventory management system is typically around USD$150 per user per month. This estimation is based on a comparison of over 70 brands listed on platforms such as Capterra, GetApp, and SoftwareAdvice. However, there are lower-cost solutions available in the market. On the higher end, some software options can cost up to $3,000 per month or may require a one-time licensing fee of a few thousand dollars. Additionally, certain software providers may charge an extra onboarding fee, ranging from around USD 500 to USD 4,000.

The best inventory managemnet software - RuiAutomation 

What is an inventory management software?

Inventory management software is a digital tool designed to simplify and automate inventory-related tasks, such as tracking stock levels, managing sales/purchase orders, and optimizing supply chain operations. It is widely used in retail, wholesale, distribution, and manufacturing industries.

By implementing inventory management software, you can gain real-time visibility into your inventory, helping prevent stock-outs and overstocking, thereby reducing inventory costs and improving management efficiency.

Standard features of inventory management software include:

• Real-time inventory tracking
• Stock alerts/reorder management
• Purchase order management
• Sales order management
• Customer/Supplier management
• Warehouse management
• Reporting

How does inventory management software charge you?

The price model for inventory management software is usually subscription-based, where you pay a recurring fee (monthly or annually) to access the software. Some software may offer tiered plans with different levels of functionality or support, allowing you to choose the most suitable option for your business. Some software solutions charge based on the number of users accessing the system, allowing you to buy a specific number of users.

Most inventory management software vendors offer a hybrid price model, combining tiered plans with per-user licensing models. You can choose the price tier that best fits your business, and as your business grows, you can purchase additional user access.

Factors influencing inventory management software costs

Several factors can affect the cost of inventory management software:

1. The number of users:

As most software charges are based on the number of users, it directly affects the cost of implementing inventory management software.

2. Features and functionality:

Some software may require an extra charge for advanced features like inventory forecasting, serial number tracking, integration with other systems, and analytics tools.

3. The number of warehouses:

Multi-warehouse capability is a critical inventory management feature often available in higher-priced tier plans.

4. The volume of inventory and orders:

Some software may have different pricing tiers based on order volume, with higher volume capabilities typically found in higher-priced tier plans.

5. Customer support:

Vendors often offer standard support for free, but higher-level support may require an additional charge. For example, some software may charge an additional onboarding support fee.

6. Customization:

If you require the software to be customized to meet your unique business needs, additional costs may be incurred, depending on the customisation's complexity.

7. Integration with other software:

Inventory management software often integrates with other software, such as finance and accounting software, customer relationship management (CRM), and eCommerce platforms. The more integrations, the higher the price is likely to be.

Return on Investment

After understanding the cost of inventory management software, you might ask, "Is it worth investing in software?"

While inventory management software involves an initial investment, evaluating the potential return on investment is important. The benefits of implementing an inventory system are significant:

• Gain real-time visibility of inventory.
• Reduce errors.
• Minimize stockouts.
• Receive low stock alerts to reduce sales loss.
• Reduce carrying costs.
• Improve order processing efficiency, saving time.
• Gain valuable reporting to aid in business decisions.
• Integration with other software reduces manual input and maintains data consistency.

How to choose the right software for your business?

To ensure you select a cost-effective and suitable inventory management software solution for your business, you can follow these steps:

Step 1: Assess your requirements:

List your current problems and determine what features you are looking for based on those problems. For example, suppose you have two warehouses and want full stock visibility across both locations. In that case, you will need the "Multi-warehouse" feature. If you spend too much time dealing with sales orders and invoicing, you may need the "Sales order management" feature.

Step 2: Research and compare:

Once you have your feature list, turn to research. Browse the software providers' websites, specifically view the "Pricing" page, which usually demonstrates each plan's price and available features. This will give you a candidate list.

Step 3: Seek demos and trial periods:

Talk to software vendors about your requirements and ask for a demo. Alternatively, try their free trial and input some of your real data to experience their entire process. Try at least three different software options and decide which one you like the most. Sometimes, they may all have the same features, but the user interface and overall experience may differ. Choose the easiest-to-use software, as you wouldn't want your staff to complain about the system and how difficult it is to use in the future.

Step 4: Consider technical support:

During your trial, ask the software vendor some questions to assess their responsiveness and ability to answer your queries properly. Implementing inventory software is not a one-time purchase. It is a long-term collaboration, as you will use it almost every day in the future. Therefore, it's essential to choose software that offers quick and reliable support. While sales teams often have an immediate response, it's important to ask technical questions that will be directed to their development team. This will reflect the actual response speed for future interactions.

Conclusion:

Investing in inventory management software is essential if you have encountered operational problems. Understanding the costs and the factors that affect the cost will help you choose the software that aligns most with your needs and maximizes your return on investment.